The Political Economy of Carbon Fund Benefits

It is very sad that Nepal, which is playing a leading role in protecting the climate and environment, is at the forefront of such a crisis. If the opportunities created with the crisis can be utilized, the benefit of the green funds will help the common Nepalese, especially the forest consumers, to face the challenge.

Green carbon fund, for whom?

The Paris Agreement of 2015 has committed the countries of the world not to increase the temperature of the world by less than 1.5 degrees by the end of the century and to do everything possible for this . Article 6 of the agreement recognizes the implementation of a voluntary system of payment of consequential payments for carbon emission reductions.

Under this system, industrialized (developed) countries have been helping to deal with such crises by voluntarily providing funds to the fund so that underdeveloped countries get it as their responsibility. But despite suffering huge economic losses, countries like Nepal have not been able to get enough benefits from these funds. In recent years, the policy of paying money from the fund for the protection of forests has been implemented, for which the beneficiary country has to find and resolve the causes of damage to the forests and conduct planned projects to improve the socio-economic status of the local communities.

This helps to meet the multi-faceted objectives of climate crisis at local, national and international levels at a low cost . The contribution of forest resources is significant for the subsistence economy of developing countries like Nepal, whose conservation should ensure the benefits received from the resources including water, environment, and biodiversity.

Mobilizing funds for results-based payments

Nepal has partnered with the World Bank's Forest Carbon Partnership Facility (FCPF) to claim emissions reduction payments while developing its forest sector. The agreement was signed in 2021 for a crediting period from 2022 to 2026.

Nepal had selected 13 districts spread in the Terai up to Wagmati in the east and Mahakali river in the west for this program . This area is not only rich in forest area and biological diversity but also an area of ​​high rate of deforestation . Most of the country's deforestation and forest encroachment have happened. Therefore, it is being tried to mobilize the amount of that fund for efforts to prevent 'Red Plus' i.e. forest destruction and erosion in these districts.

This can be explained from three aspects: firstly, focusing investment in areas with rapid deforestation, secondly, mobilizing foreign financial resources to prevent the deforestation that occurs every year without burdening Nepali taxpayers, and thirdly and most importantly, the country's payment Adding a new dimension to the system is to practically apply the concept of payment based on results. Nepal's forest degradation, especially in Terai and interior Madhesh, is rapid and complex in terms of management. Therefore, the use of results-based payment systems was initially thought to be risky and ineffective. However, in 2022 and 2023, it was found that for the first time, the efforts of the land perimeter project (Tal) have been successful in preventing deforestation compared to 2018.

The role of community forests

Focusing on the contribution of the forest sector, Nepal will implement climate change emission reduction strategy from 2021. A result-oriented payment system has been implemented in projects under Red Plus. It is believed that the role of community forest consumers and stakeholders, who occupy half of the total forest in Nepal, will be successful in preventing forest degradation through a result-oriented payment system.

This system, which was implemented after about two decades of community forest management, is expected to protect the sustainable consumption of forest products in the areas where the program is implemented and reduce emissions, which includes the reduction of all types of risks that cause forest degradation and results-based payment.

In various activities to reduce risk, improving the management practices of community forests by making traditional practices agile, strengthening the access of forest user groups at the local level through transfer to the national forest community, increasing services and investments to expand the private forest sector, providing financial security, forest production Actions to reduce use include expanding access to alternative energy sources such as biogas and improved stoves, preparing for settlement of unsettled settlements, devising integrated land-use plans, discouraging forest conversion and strengthening management of protected areas .

New learning

The practice of result-oriented payment has introduced an alternative method to our government agencies to implement the project more effectively, for which the employees and local communities, including the officials at the institutional leadership level, should gradually adopt it . It also teaches that better results can be achieved by showing results in the work area than by completing

methods and processes, but nothing can be achieved if the results are not good. In another sense, it is also an encouraging model to go on the path of self-reliance, which teaches everyone to be responsible and accountable.

In particular, it seems that Nepal should not build this framework of collectiveness and cooperation to become capable of carbon trading. In order to solve the challenges that come with this, there is a need to emphasize cooperation and collaboration by bridging the gap of trust between the forest-dependent communities and the government. The payment received by the government through the Forest Development Fund for the implementation of Red Plus should be used to improve the economic development and living standards of local communities.

In addition to community forests, private forests have also contributed to increase greenery . The expansion of private forest sector seems to have helped in carbon storage . However, to get the recognition of forest, at least 0.5 hectare area and 10 percent of the area must be covered by tree canopy, so the private forest farmers are deprived of the benefits of Red Plus. There is a need to implement a policy to promote carbon trading by including farmers who grow such plants or private forests outside the forest area.

The future path

The amount of green carbon fund available in the future seems to increase . In such a situation, it is necessary to create an environment for proper utilization of carbon funds. Because for a country like ours that has a trade deficit, the income from such schemes also helps to cover the deficit . In addition, there is an increasing possibility to support the country's economy by creating abundant employment opportunities. The

lake geo-perimeter program has also opened more new doors of opportunity by pointing out the aspects that need to be improved while building carbon incentive plans for Nepal. As the labor of local communities is more spent for forest management, discussions can be conducted on how carbon finance can be transferred directly to encourage them.

Results-based payments are a form of incentive, but must ensure the cooperation and support of forest-dependent communities. Because the changes in them can bring improvements in forest management. Therefore, this scarce resource should not be misused by spending it for other purposes as only investment in the right activities will yield results. Learning from governance and institutional strengthening, Nepal needs to improve and expand its negotiating capacity at the international level to make the investment projects of

fund result-oriented. Currently paying $5 per ton is reasonable, but there are plenty of opportunities to sell at higher rates.

In conclusion, Nepal's forest sector has been dependent on donors for more than half a century and results-based payments are creating new opportunities to break out of donor dependence and address environmental challenges. One of the latest steps towards establishing a sovereign forest fund is . Carbon finance is not a poverty alleviation fund that can be spent by governmental or non-governmental organizations and INGOs at the behest of donors.

is a service that is paid from foreign sources for working in a way that results can be seen at the ground level, in which if you work according to the commitment, you will get incentives and rewards, or you will have to be punished. Therefore, the role of the local people, community and stakeholders should be appreciated and the policy and program framework should be changed accordingly. [email protected]